Use the following information to draw XYZ's yield curve, using: - Average real risk free rate of...

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Finance

Use the following information to draw XYZ's yield curve,using:
- Average real risk free rate of return is constant over 30years at 1%
- Inflation rate over 30 years is expected to be 4% in the firstfive years, 2% in year 6-15, and 1% in year 16-30
- DRP is constant at 1.5%
- LP is constant at 0.5%
- MRP derived from MRP=(t-1)*0.1%

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3.7 Ratings (561 Votes)

According to the information giveneach data is calculated and YTM is equal to real risk freerate Inflation DRP LP MRPMRP for example is calculated as followsyear 5 5 1 01 04Year See Answer

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Transcribed Image Text

Use the following information to draw XYZ's yield curve,using:- Average real risk free rate of return is constant over 30years at 1%- Inflation rate over 30 years is expected to be 4% in the firstfive years, 2% in year 6-15, and 1% in year 16-30- DRP is constant at 1.5%- LP is constant at 0.5%- MRP derived from MRP=(t-1)*0.1%